Auto loan delinquencies rise along with originations

The auto loan delinquency rate -- the ratio of borrowers 60 days or more delinquent on their auto loans -- increased to 1.04 percent in the third quarter of this year.

The delinquency rate remains well below the 1.22 percent average recorded for the third quarter between 2007 and 2013, according to the financial services unit of Chicago-based TransUnion.

Auto loan debt per borrower increased for the 10th straight quarter, moving up 4.7 percent from $15,943 in third quarter of 2012 to $16,685 in the quarter that ended on Sept. 30. On a quarterly basis, auto loan debt also increased from $16,410 in the second quarter of this year.

TransUnion's report is based on credit data from virtually every credit-active consumer in the United States. The data does not include any names, addresses or other identifying information.

Pete Turek, vice president of automotive in TransUnion's financial services unit, said the auto loan sector continues to have relatively low delinquency rates and increasing loan balances.

"Auto loan originations also are increasing as the demand for both new and used autos remains strong," Turek said. "While subprime delinquency levels are rising, they still remain at manageable levels."

The subprime delinquency rate -- those consumers with a credit score lower than 640 on a scale of 501-990 -- increased from 5.30 percent in the third quarter of 2012 to 5.6 percent in the same quarter of 2013. Despite the increase, the delinquency rate for this class of borrower remains near levels observed in recent third quarters.

TransUnion recorded 59.5 million auto loan accounts as of Sept. 30, up from 56.2 million at the end of the same quarter of 2012.

"This number is approaching pre-recession levels, and we believe there may be more room for it to rise," Turek said.

Only 15 states experienced either a decline or had their auto loan delinquency rates remain flat between the third quarter of 2012 and the same period this year. The largest delinquency declines occurred in Oregon, South Dakota and California.

The largest increases occurred in Alaska, Michigan and West Virginia. Auto loan balances rose in every state except Michigan, which experienced a 0.3 percent decline between the third quarter of 2012 and the third quarter of this year.

TransUnion is forecasting auto loan delinquencies to rise slightly in the fourth quarter because of historic seasonality associated with auto financing.

"Auto loan delinquencies generally rise in the fourth quarter as consumers place higher priority on other consumer goods during the holiday shopping season," Turek said.